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Example Shadow Price

1. The document discusses how increasing the raw material B by 2 units affects the objective function value, showing an increase of ₱2,700. 2. It also analyzes how increasing the right-hand side constraint of an optimization problem by 4 units changes the optimal solution values and slack variables to minimize cost. 3. Additionally, it applies the 100% rule to show that decreasing one right-hand side constraint by 3 units and increasing another by 2 units keeps the shadow prices valid. 4. Finally, the 100% rule is used again to verify that decreasing one right-hand side constraint by 1 unit and increasing another by 6 units maintains an optimal solution.

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Gabriella J
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470 views4 pages

Example Shadow Price

1. The document discusses how increasing the raw material B by 2 units affects the objective function value, showing an increase of ₱2,700. 2. It also analyzes how increasing the right-hand side constraint of an optimization problem by 4 units changes the optimal solution values and slack variables to minimize cost. 3. Additionally, it applies the 100% rule to show that decreasing one right-hand side constraint by 3 units and increasing another by 2 units keeps the shadow prices valid. 4. Finally, the 100% rule is used again to verify that decreasing one right-hand side constraint by 1 unit and increasing another by 6 units maintains an optimal solution.

Uploaded by

Gabriella J
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1.

Raw material B increase by 2 units

Maximize z = 3,000x + 2,000y Maximize z = 3,000x + 2,000


z = 3,000 (3.33) + 2,000 (1.33) z = 3,000 (4.67) + 2,000 (0.67)
z = ₱ 12, 650 z = ₱ 15, 350

Shadow Price = New profit – Old profit


₱ 15,350 – ₱ 12,650
= ₱ 2,700

Interpretation:
An increase of 2 tons for Raw Material B will cause a change in the value of objective function
by ₱ 2, 700. It provides a direct effect between the resources (Raw material B) and the total output
(profit). The color blue shade in graphical solution shows the effect of profit and, the effect of
right-hand constraints called dual value or shadow price.
2. RHS increased by 4 computer solution (Minimization)

• The 2x + 2y ≥ 10 change into 2x + 2y ≥ 14 wherein it generates different value of x and y,


objective function and, LHS to minimize the cost

• The binding constraints in the first 2 of both pictures have a slack o zero. Meanwhile the
blue picture slack of 4 and the another one is 20 which implies that the unused resources
increase to minimize the cost.
Range of Feasibility Range of Feasibility
Material 1: 5 to 11 Material 1: 7 to 19
Material 2: 9 to 18 Material 2: 9 to 18

The range of feasibility in Material 1 change from 5 to 11 to 7 to 9 units which


means that the cost also increases in Material 1 (₱52 to ₱62) while in Material 2
the range remain the same.

Range of Cost Range of Cost

Material 1: 4 to 12 Material 1: 4 to 12

Material 2: 8 to 24 Material 2: 8 to 24

There is no change in range of cost

3. 100% rule (Shadow Price)

∑Proposed change 3
RHS Material 1: 9 – 6 = 3 = 4 = 𝟎. 𝟕𝟓
Allowable change

∑Proposed change 2
RHS Material 2: 12 – 10 = 2 = 8 = 𝟎. 𝟐𝟓
Allowable change
The sum of proposed ratio is equal to 100% rule, which means the shadow price will remain valid.
The shadow price of material 1 and 2 which is 2 and 3 respectively is valid even the constraint
RHS in material 1 decrease and increase in material 2.

4. 100% rule (Optimal Solution)

∑Proposed change 1
RHS Material 1: 8 – 7 = 1 = 4 = 𝟎. 𝟐𝟓
Allowable change

∑Proposed change 6
RHS Material 2: 18 – 12 = 6 = 12 = 𝟎. 𝟓𝟎
Allowable change

The sum of proposed ratio is 75% ≤ 100% which means the optimal solution is valid.

Jenny Rose Libo-on


Management Science
10/28/2021

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